When you file bankruptcy, an “automatic stay” goes into effect against all of your creditors. The automatic stay, Section 362(a) of the U.S. Bankruptcy Code, among other things, prohibits creditors from contacting you to collect a pre-petition debt. In short, no more harassing phone calls from your creditors! This is one of many advantages the law offers to individuals who file Chapter 7 bankruptcy or Chapter 13 bankruptcy.
All of the creditors listed in your bankruptcy will receive notice within 5 business days when your bankruptcy petition is filed. This notice is sent to every creditor, both electronically and by mail. Generally, most creditors will stop all collection attempts immediately after they receive notice of the bankruptcy.
Should you receive phone calls from any of your creditors after you’ve filed bankruptcy be sure and let the creditor know you filed bankruptcy and provide them with your case number, the filing date and the name and phone number of your attorney. It is important that you document all of the phone calls you receive from the creditor by writing down the date and time you receive the calls and the name of the person you talked to. If a creditor continues calling you after you’ve informed them of your bankruptcy filing, they are in violation of the automatic stay and you should contact your attorney to let them know. Most likely your attorney will call the creditor and give them a courtesy warning to stop making contact with the debtor. At that point, if the creditor continues with their collection efforts by calling or sending you bills, your attorney may choose to file sanctions against the creditor for violating the automatic stay.
When filing bankruptcy you have the option to continue to pay for your car lease payment or you can opt out of your car lease payment. In a bankruptcy you can legally be released from many of your contractual obligations, this includes things like cell phone contracts, apartment leases, and even a car lease. In a Chapter 7 bankruptcy those debts will be wiped out. In a Chapter 13 bankruptcy you will pay back only a portion of the total amount owed.
For example, John Doe has one year left on a car lease and is paying $300 a month. If he does not want to continue the lease and at the time of filing a Chapter 7 bankruptcy he will return the car (after speaking with his bankruptcy attorney first) and will no longer be responsible for that $300 payment each month. Therefore, the additional $3,600 that John Doe would have paid through the end of his lease will be included in his bankruptcy. In a Chapter 7 bankruptcy the $3,600 will be wiped out. If, instead, John Doe were filing a Chapter 13 bankruptcy then he would be responsible for a portion of the remaining balance.
There are some important things to consider before deciding not to continue the lease. First, and probably the most obvious, is that you will need to return the car. If that car is your family’s only means of transportation and is a reasonable lease you may want to think twice before surrendering the lease into the bankruptcy.
Another factor to consider is if anyone else’s name is on the lease. If you and your mother, or boyfriend/girlfriend etc. have both signed the lease then once you release that lease into bankruptcy that other person becomes solely responsible for the financial obligations of that lease. For example, if John Doe is filing a Chapter 7 bankruptcy and his mother has co-signed the lease with him, she will be solely responsible for the lease payments if he surrenders the lease.
There are a number of things to keep in mind when deciding whether or not to keep your car lease when filing bankruptcy. It is important to know your options and to understand that you can surrender the lease if it is in your best interest. If you chose to keep the lease then you would just continue your monthly payments as usual. As long as you are current on all payments most things in the lease would remain the same.
The law does not require a person to hire an attorney to file bankruptcy. The bankruptcy can be filed “pro se” where you represent yourself. However, an individual is taking a risk by not hiring an experienced attorney to navigate the court system and to ensure the paperwork is prepared correctly.
It is extremely important that all schedules required by the bankruptcy court are properly prepared and filed with the court in a timely manner. The bankruptcy court may dismiss the bankruptcy case if schedules are missing. In addition, an individual risks losing their assets – cash, houses, cars, businesses, etc. – if the bankruptcy paperwork is not prepared in a way that fully protects the filer’s assets. Read more
When most people think about attorneys, and the law in general, they think about what they see on TV. Most envision the big fancy courtrooms, attorneys arguing back and forth and yelling out objections to the other attorney’s questions. In real life, court is rarely how it appears on TV. Instead, it’s usually vastly different. Regardless, a common question we get at Duncan Law is – Will I have to go to court if I file bankruptcy?
The vast majority of people who file bankruptcy will never see the inside of a courtroom. My unscientific estimate would be that only 1 out of every 10 cases will need to appear before a bankruptcy judge, maybe less. That being said, whether you appear in court will largely be determined by the facts of your specific case. Talking with your attorney will give you a more clear idea of whether or not you have the type of case that is likely to appear in bankruptcy court.
Although only a very few cases will appear in front of a bankruptcy judge in bankruptcy court, all cases will appear at a creditors’ meeting. Check out our blog post and video on what to expect at the creditors’ meeting to learn more. Similar to what most people expect in court, you will be put under oath and asked a handful of questions. Luckily, you will typically only be in front of the Trustee for about five minutes, if not less. Your bankruptcy attorney should help prepare you for your creditors’ meeting.
Once you decide to file Bankruptcy, whether it is a Chapter 7 bankruptcy or Chapter 13 bankruptcy, you will need to decide if you intend on keeping your home. If you qualify for a Chapter 7 bankruptcy filing and you wish to keep your home, you will need to be current with your mortgage payment(s) and your homeowners’ association dues at the time of filing. As per federal bankruptcy law, you must remain current throughout the duration of the bankruptcy; this includes first, second, third mortgages attached to the home, as well as, your homeowner’s association dues. If you fail to keep current with your mortgage payment(s) or your homeowners’ association dues, the “relief from stay” can and most likely will be lifted and the mortgage company or the homeowner’s association may initiate foreclosure proceedings on the home.
In a Chapter 13 bankruptcy filing, you will make monthly payments to the Trustee’s office. The Trustee will then distribute those funds to your creditors. The creditor payments are according to priority deemed by the Bankruptcy Court. Your mortgage lender is almost always one of the creditors at the top of the list. Therefore, you will not be making direct payment to your mortgage lender if you are behind on payments. This payment will be included in your Chapter 13 payment plan and the Trustee’s office will make the mortgage payment from the funds you send each month. An exception would be your homeowners’ association dues, which you will continue to make payment directly to the homeowners’ association. Also, in some districts if you are current on your mortgage payment the Trustee will allow you to make direct mortgage payments to the mortgage company.
Regardless of which type of bankruptcy you plan to file, if you want to keep your house you will need to continue to make your mortgage payments and stay current on your payments.
Almost all Chapter 13 bankruptcy cases are set for a period of anywhere from 36 to 60 months. As you can imagine, a lot change in a person’s life during a three to five year time frame, particularly in a somewhat unstable job market. Although a person may have a well-paying, stable job at the time their Chapter 13 bankruptcy case is filed, they may lose their job a year or two later while still in their bankruptcy.
If you lose your job while you are in your Chapter 13 bankruptcy and are no longer able to afford your Chapter 13 payments, you will need to contact your attorney immediately so that he or she can take the necessary steps to try to reduce your plan payment. It is important to know, however, that just because you lose your job, your payments will not automatically decrease.
For example, if you are only paying 2% back to your unsecured creditors (credit cards, medical bills, personal loans, etc.) and the rest of your plan payments are for your secured debts (mortgage, car loans, furniture, etc.) then the Trustee may not be able to lower your payment because she would not be receiving enough to make all of your secured debt payments every month. In other words, if by lowering your plan payment, the Trustee is not receiving enough money from you each month to pay all of your secured debts, then the Trustee will have to dismiss your case. The only option in a situation where most (or all) of your plan payment goes to your secured debts is to surrender one (or more) of your secured debts. For example, if you have three vehicles included in your plan payment, you may be able to reduce your plan payment enough for you to afford the plan payment by surrendering one of the vehicles.
Obviously, each situation is different when it comes to the plan payment and amount being paid to secured and unsecured creditors, so you will have to contact your bankruptcy attorney for specifics about your own situation. However, there is the possibility of at least attempting to lower your Chapter 13 plan payment if you lose your job while you are in bankruptcy.
Yes, most of the time. The federal bankruptcy laws allow you to protect certain property by using state exemptions to protect the automobiles. However, you can only protect up to a certain amount of equity in a vehicle. For example, North Carolina allows you up to $3500 in a motor vehicle exemption to protect one vehicle per person filing bankruptcy. Therefore you can have a vehicle that is bought and paid for to have a value up to $3500 using the motor vehicle exemption and protect the vehicle. What if you have two vehicles titled in your name that are paid in full and have a total value of $6000? Generally speaking you cannot protect, in full, both vehicles unless you have some “wildcard” exemption left over to use to help protect the second vehicle. This wildcard exemption will be discussed on another topic, but it usually allows $5000 per person filing the bankruptcy to protect “other” property. However there are exceptions, so check with an attorney at Duncan Law for specific advice.
Another unusual scenario is you hypothetically have ten brand new 2011 Mercedes each worth up to $100,000 each. However, you owe $100,000 on each vehicle. Therefore you have no equity in the ten vehicles. With no equity in the vehicles, you can have ten new Mercedes worth one-million dollars and be able to keep all the vehicles, as long there is no equity and you continue to make you payments on the vehicles. This is usually valid in a Chapter 7 bankruptcy, however most Chapter 13 bankruptcy Trustees will not allow you to keep excessive vehicles that you do not need.
What if you have an old run down 2000 Mazda that is paid off in full, worth only $4500. Remember, without your wildcard exemption you can only protect $3500 in value. Therefore you have $1000 in excess equity and the Chapter 7 could seize the vehicle and sell it. You would get the first $3500, the Trustee would receive anything in excess of $3500.
In conclusion, it doesn’t seem fair, you could lose the one old car that is paid for, but keep the ten new Mercedes since there is no equity in the vehicles. That’s why you need help from Duncan Law.